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India stands tall as Asia falls

Apr 25, 2009

Although recording gains on a week- on-week basis, the Indian markets did see some volatility as results of industry heavyweights poured in full flow. The BSE-Sensex ended higher by 2.8% over the closing levels of last week. However, India was the only market which recorded gains as compared to its Asian peers, Japan, Hong Kong, China (each down by 2.2%) and Singapore (down 2.3%). It is believed that Asian markets stumbled mainly due to concerns over companies' earnings. In addition, it may be noted that rest of Asia's six week rally came to an end this week. As for other global markets, Germany (up 2.2%), France (up 1.5%) and UK (up 0.4%) ended the week on a firm note while US (down 0.1%) and Brazil (down 0.7%) ended in the red.Coming to the performance of sectoral indices in India, stocks forming part of the metal, realty and IT sectors emerged as top gainers during the week. The BSE-Metal, the BSE-Realty and BSE-IT indices recorded gains of 5.5%, 4.2% and 3.8% respectively. On the other hand, stocks from the banking and FMCG space remained the lowest gainers. The BSE-Smallcap and BSE-Midcap continued their upward journey by recording gains of 3% and 3.7% respectively over the previous week.

This week was a significant week for select industry leaders such as Reliance Industries, HDFC Bank, Wipro and Hero Honda, as they announced their full year results. Reliance Industries (RIL) reported a 9.6% YoY growth in topline, while its operating profits declined by 17% YoY. This was on the back of a 5.2% YoY contraction in EBITDA margins (16%) during the year. Further, RIL recorded a 21.5% YoY drop in profits, mainly on account of an extraordinary loss of Rs 3.7 bn and a gain of Rs 47 bn income (primarily arising out of transactions concerning the sale of stake in Reliance Petroleum), which it earned in FY08.

Banking major, HDFC Bank reported an interest income growth of 62% YoY on back of a 48% YoY growth in the advances during FY09. It may be noted that advances were higher mainly on account of its integration with Centurion Bank of Punjab. Net interest margin for the year marginally dropped by 0.2% to 4.2% due to fall in proportion of current and savings account (CASA). At the end of the year, the net non-performing assets (NPAs) increased to 0.6% compared to 0.2% a year ago. This has resulted in lower growth of net profit of 41% YoY for the year.

If one were to go by the results of Hero Honda, it would seem as if the sector is not facing any problems. The company recorded an impressive performance during 4QFY09, as its bottomline surged 35% YoY on the back of a 23% YoY jump in topline. Operating margins expanded by 1.2% YoY to 16% during the same period. For FY09, Hero Honda recorded a 20% YoY growth in topline on the back of a 12% growth in volumes. The company's operating profits grew by 30% YoY while its bottomline grew by 32% YoY.

IT major, Wipro announced its results during the week. The company's topline grew by 28% YoY during FY09, while its net profits grew by 19% YoY. The company recorded a 0.3% decline in its operating margins, mainly on account of an increase in overall costs (in spite of depreciation of the rupee against the dollar).

The telecom industry has been on a high over the past two months as it continues to witness a high pace of subscriber additions. It is believed that during the month of March 2009, the industry added nearly 15.6 m subscribers. In fact, the struggling wireline segment also managed to increase its subscriber base marginally. As per the Telecom Regulatory Authority of India (TRAI), the total wireless subscriber base at the end of the month (GSM, CDMA and WLL) stood at 391.8 m, while the total number of telephone connections reached 429.7 m. It may be noted that at the end of March 2009, the wireless subscriber base was higher by 50% YoY over the corresponding month in the previous year.

The past week was a disappointing one for Punj Lloyd as its UK subsidiary Simon Carves (SCL) received an unfavourable ruling in the adjudication process with Sabic UK Petrochemicals. Just to give a brief about the issue - SCL had received a contract in 2006 to design, construct and pre-commission a low density polyethylene plant in UK from Sabic UK Petrochemicals. However, Sabic terminated the contract prior to its agreed completion date. This propelled SCL to seek the views of an adjudicator on the grounds upon which the contract was terminated. SCL sought a restitution of 28.5 m, in respect to an advance payment bond and a performance bond called by Sabic. While the adjudication decision has not been in favor of SCL, it will take the next stage of dispute resolution by putting the matter before the court.

Source: Yahoo FinanceSource: Yahoo Finance

Source: SEBISource: BSE

Source: BSESource: BSE

Movers and shakers during the week
Company 17-Apr-09 24-Apr-09 Change 52-wk High/Low Change from 52-wk High
Top gainers during the week (BSE-A Group)
Adani Enterprises 350 444 26.8% 878 /238 -49.4%
LIC Housing 278 344 23.7% 365 / 151 -5.8%
Housing Development Infra 129 154 19.3% 668 / 63 -77.0%
Pantaloon 170 202 19.0% 511 / 105 -60.5%
GVK Power & Infra 25 29 18.5% 55 / 10 -46.5%
Top losers during the week (BSE-A Group)
Rolta India 96 82 -14.4% 344 /41 -76.2%
Unitech 53 45 -14.4% 331 / 22 -86.4%
Zee Entertainment 128 115 -10.5% 243 / 88 -52.9%
REI Agro Ltd. 66 62 -6.7% 179 / 36 -65.4%
Hindustan Copper 196 183 -6.7% 354 / 70 -48.2%
Source: Equitymaster

Inflation as measured by the wholesale price index or WPI rose to 0.26% for the week ended April 11, from 0.18% in the previous week. Rise in prices of essential food articles like cereals, eggs, salt, fruits, and vegetable is reported to be the reason for the rise in inflation for the said week.

As against expectations of a status quo with regard to policy moves, the RBI chose to tread in line with the market demand of further cutting down interest rates. In its annual review of the monetary policy for 2008-09 released during the week, the central bank exercised its power to reduce the benchmark repo and reverse repo rates by 0.25% each and encouraged banks to augment their credit growth rates. The central bank reiterated that while public investment can play a critical role in the short-term during a downturn, private investment has to increase as the recovery process sets in. A major macroeconomic challenge at this juncture is to support the drivers of aggregate demand to enable the economy to return to its high growth trajectory. While the RBI's rate cut move stands well justified, now it is for the banks to act. In fact some private sector banks also responded to the RBI's move by cutting their lending rates this week.

During the week, a leading business daily reported that the RBI and Ministry of Finance expect India's GDP growth to remain at 6% even in the worst case scenario in the current fiscal. It may be noted that economic bodies like World Bank and IMF have projected growth rate of nearly 5% for India in this fiscal while predicting the world economy to contract by 0.5% to 1.7% for the first time in 60 years. According to the chief economic advisor of India, India could grow at a rate of 7% if the global economy begins to recover post September 2009.

In international news, the economic meltdown has taken its toll on software behemoth Microsoft as it witnessed its first ever quarterly sales fall in its 23 year old history as a public company. While its sales dropped by 6% YoY, earnings slumped by 32% during the quarter ended March 31, 2009. The reason behind the same is the slump in demand for its Windows operating system as PC sales drag downwards. Microsoft's CFO Chris Liddell has been quoted by CNN Money as saying that the current recession has been "the most difficult economic environment we've faced in our history."


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